Dr. Shahamak Rezaei, Associate ProfessorDepartment of Society & Globalisation

Roskilde University, Denmark

Immigrant Entrepreneurship, Ethnic Economy, Informal Economic Activities & Undocumented Workers

16th International Metropolis Conference 12 - 16 September 2011 The Azores, Portugal

Financing of immigrant-owned enterprises in Denmark

• Research results from Financing of immigrant-owned enterprises in Denmark – opportunities and barriers

- a report prepared on behalf of the Danish Ministry of Refugee, Immigration and Integration Affairs

• Economic framework:– Enterprise owners (immigrant or non-immigrant) act

rationally upon the available options and economic incentives – Traditionally used ethnic/cultural explanations of the choices

made by immigrant enterprise owners has rather limited explanatory strength and produce unconstructive perspectives

Number of enterprises (1998), N 0=279

Existing enterprises (2003) z 1=248

Closed down (2003)z 2=31

Participating existing

enterprises n 1=135 (54,4%)

Non-participa-ting existing enterprises

q 1=113

Participating closed downn 2=18

(58,1%)

Non-parti-cipating closed down q 2=13

Survey Data I

Number of enterprises (1998), N 0=279

Existing enterprises (2003) z 1=248

Closed downenterprises (2003)

z 2=31

Participating existing

enterprises n 1=135 (54,4%)

Non-participa-ting existing enterprises

q 1=113

47 enterprises

have no employees Participating

closed down n 2=18

(58,1%)

Non-parti-cipating closed down q 2=13

88 enterprises

have employees

Of these 88: Number of Number of responses enterprises from empl. (n 3)

Enterprises where 0 empl. participated: 21 0Enterprises where 1 empl. participated: 53 53Enterprises where 2 empl. participated: 14 28Total 88 81

Survey Data II

Financing of immigrant enterprises

• Only 40% used Danish bank loans to finance enterprise• Notice also differences across national origin

(Survey 2003, existing enterprises, multiple responses possible)

Former

Jugoslavia Pakistan Turkey Iran

China, HK Taiwan, Vietnam

Total

n 25 24 43 28 15 135

22 20 37 23 12 114 Own savings 88,0% 83,3% 86,0% 82,1% 80,0% 84,4%

11 12 19 10 1 53 Danish bank loans 44,0% 50,0% 44,2% 35,7% 6,7% 39,3%

11 9 21 14 9 64 Loans from family 44,0% 37,5% 48,8% 50,0% 60,0% 47,4%

9 0 10 6 2 27 Loans from friends 36,0% 0,0% 23,3% 21,4% 13,3% 20,0%

Payment under the table

Former Jugoslavia

Pakistan Turkey Iran

China, HK,

Taiwan, Vietnam

Total

1 0 1 0 0 2 Not responded 5,0% 0,0% 3,0% 0,0% 0,0% 1,9%

15 13 24 17 12 81 Yes

75,0% 81,3% 72,7% 81,0% 85,7% 77,9%

4 3 8 4 2 21 No

20,0% 18,8% 24,2% 19,0% 14,3% 20,2%

20 16 33 21 14 104 Total

100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

• 78% of immigrant enterprise-owners were met with demands of payments under the table when acquiring the enterprise

• Notice also differences across national origin

(Survey 2003, existing enterprises)

Working undeclared• 85% of those who made payments under the table

now work undeclared• Compare to those who did not make payments under

the table: 43% work undeclared

• Table shows statistically significant relation between working undeclared and having met demands of payments under the table when acquiring the enterprise

(Survey 2003, existing enterprises)

Have

worked undeclared

Have not worked

undeclared Total

0 2 2 Not responded

- 100,0% 100,0%

69 12 81 Payment under the

table

85,2% 14,8% 100,0%

9 12 21 No payment under the

table 42,9% 57,1% 100,0%

78 26 104 Total

75,0% 25,0% 100,0% 2 22,05

Significance (two-sided <0,0001

Employees’ choice of finance

Former Yugo-slavia

Paki-stan

Tur-key

Iran

China, Vietnam, Taiwan,

HK

Afghani-

stan Iraq

Thai-land

Former Soviet Union

Total

N 9 8 15 7 6 6 3 2 1 57

9 8 14 7 6 6 3 2 1 56 Own savings 100% 100% 93% 100% 100% 100% 100% 100% 100% 98%

4 2 2 3 0 1 1 1 0 14 Danish bank loans 44% 25% 13% 42% 0% 17% 33% 50% 0% 25%

2 1 0 4 5 2 2 1 1 18 Foreign bank loans 22% 13% 0% 57% 83% 33% 67% 50% 100% 32%

8 8 14 5 6 6 3 1 1 52 Loans from family 89% 100% 93% 71% 100% 100% 100% 50% 100% 91%

4 0 2 1 1 1 0 1 0 10 Loans from friends 44% 0% 13% 14% 17% 17% 0% 50% 0% 18%

Survey among employees who express a wish to become an enterprise-owner:

• Only 25% intend to apply for Danish bank loans• 91% will rely on loans from family members

(Survey 2003, existing enterprises)

Main Research Results• When financing the start-up of an enterprise, an

immigrant enterprise owner is more likely to rely on his/her own savings or loans from his/her family than obtaining loans from Danish banks

• 4 out of 5 immigrant enterprise owners have met demands of additional payment under the table when acquiring the enterprise

• Those who have made payments under the table show a higher propensity to working undeclared

• Only 25% of the employees, who express a wish to become an enterprise owner, is expecting to use Danish bank loans as a source of finance